Everything old is new again: the 7 models of selling things
Stephen Bounds — Tue, 24/04/2012 - 01:17
Over at Club Troppo, Ken Parish tentatively flagged the question of micropayments for access to online information (and specifically, news) and promptly got shot down for his troubles.
However, he did make me consider that the nature of most successful online business models are not some "brand new sales model". Rather, they lean on the oldest principles of commerce in existence.
All businesses boil down to three components: creation, distribution, and servicing of some product. At the end of the day, a market exists when both buyers and sellers can achieve a valuable outcome from the prices set on some or all of these components.
This leads us to 7 models for any business, whether online or not:
(1) Commission model – fee to create, no fee for distribution, no ongoing expertise.
In many ways the simplest model. Someone values the work a creator can undertake, and pays them to act in that capacity. What happens afterwards is not the concern of the creator since their part of the compact is discharged. A typical example is the commission of a public artwork.
(2) Gated access model – no fee to create, fee for distribution, no ongoing expertise.
Producer makes products up-front without any guarantee of a sales price or volume. Here the ability to restrict distribution of the products being made available is very important. This is comparatively easy with rivalrous goods (such as apples) but is increasingly difficult with Intellectual Property (such as commercial music).
(3) Service model – no fee to create, no fee to distribute, fee for ongoing expertise.
If you are confident that people will have to come back to you for services in order to use and/or continue using your product, then it is viable to give away your product, or a starter version of your product, for free. Most prominent examples are razors ("give away the razor, sell the blades") and Linux (with Red Hat Linux recently passing the $1 billion in services mark).
(4) Creative agent model – fee to create, fee to distribute, no ongoing expertise.
A blend of (1) and (2) – the producer requires a fee to cover the costs of creation regardless of whether a final purchase of the product takes place. Most often used in visual arts fields such as photography and advertising.
(5) Development and support model – fee to create, no fee to distribute, fee for ongoing expertise.
Although the product is commissioned and developed on a paid basis, with the product being handed over to the purchases on completion – ongoing maintenance becomes an important part of the package being paid for.
(6) Licensing and support model – no fee to create, fee to distribute, fee for ongoing expertise.
Most traditionally found in the software industry, where a pre-developed product will
typically be licensed (not purchaed) with a 20% additional annual charge for maintenance, bug fixes, updates, and support.
(7) Full services model – fee to create, fee to distribute, fee for ongoing expertise.
All of the above! Comparatively rare due to the perceived lack of value being delivered compared to costs.
Micropayments are just another form of gated access. It would be nice to think that journalism can move beyond this into other possible models of business transactions?
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